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I'm scrambling to get the best deal for my SIPP this month, but I only have £500 on hand at the moment.
I tend to invest large sums in individual stocks but have little cash unless I sell something, which I don't want to do in today's volatile market. However, I can use my £500 to test the waters, and buy more if I have more money.
The stock I'm looking at FTSE 100 home improvement retailer Kingfisher Group (LSE: KGF). I have been living alone for years. Now I think events may turn in their favor.
FTSE 100 recovery play
Kingfisher owns more than 1,300 stores in nine European countries, including B&Q, Screwfix, Castorama, Brico Dépôt and TradePoint. Inevitably, it has been overcome by the cost of living crisis, which has hit consumer spending while rising mortgage rates are stifling property sales. People spend a lot of money renovating their homes after buying one.
I last looked at the stock on March 14th, when I said it looked pretty ripe “inflation peaks, interest rates fall, consumers have more to spend and the housing market stabilizes”.
That process is now underway, as yesterday the Bank of England rate cut another step in the right direction. Since I wrote that, the Kingfisher share price has risen 21.73%, from 225.9p a share to today's (2 August) 275p.
You did well, but there is a problem. I actually didn't follow my own advice and buy. That means I missed out on that growth. In March, Kingfisher traded at 7.7 times trailing earnings. Today the shares are overpriced at 12.85 times earnings. And the yield fell slightly, from about 5.25% to 4.85%. Did I miss my chance?
Income and growth
I will call it another way. Obviously, I missed one key opportunity, but is there still a chance to recover here?
Q1 sales showed they're not out of the woods yet, with total sales down 0.3% to £3.26bn on a reported basis. France is doing particularly badly and judging by recent events, it may take some time to recover. Other Kingfisher markets were also underperforming, including the UK and Ireland.
The board expects adjusted pre-tax profit to range from £490m to £550m in the year to 31 January 2025. That is down from £568m last year. Housing recovery will not bring an immediate boost. Home improvement demand tends to decline, the board said, so we may not see a big impact until next year.
Despite all that, Deutsche The bank upgraded Kingfisher to buy with a target price of 310p on 9 July. That's up 12.7% today. The board is also pushing ahead with a £300m share buyback.
I'm sorry, but I was hoping for more. Kingfisher is a solid long-term buy and hold, but I can find exciting prospects for my £500 in the FTSE. The search continues.
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